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Common Mistakes Claiming Charitable Donations on Taxes

charity jar

Giving to charity does good, feels good and could earn you a tax break. But if you aim to claim a deduction for donating, be sure you’re also giving some attention to properly preparing your return. CPA and former government-appointed tax auditor Jules Hunter narrowed down three common mistakes that could save you time, money and possibly an IRS penalty when claiming tax-deductible donations.

Not Claiming Out-of-Pocket Expenses Incurred While Volunteering

Many taxpayers mistakenly try to claim time they donated to a charitable donation (which is not tax deductible), however they often overlook the out-pocket-expenses, such as mileage accrued on their vehicles while volunteering, which are tax deductible.

Miscalculating a Deduction

When taxpayers receive a benefit such as event tickets in exchange for their donation, they often (and mistakenly) try to claim the full amount of their cash contribution without subtracting the fair market value (FMV) of the tickets. You may claim the full deduction only if you refuse the tickets.

Not Keeping Proper Records

“Substantiation is something the IRS focuses on,” Hunter adds. Make sure receipts for donated goods include estimated value. And if you make a contribution of $250 or more in a day, be sure to get written acknowledgement from the organization.

Should You Correct Your Return?

If you make a mistake, such as leaving out a deduction, you have three years from the filing date to amend your return.

“Filing amended returns does not increase your chance of the original return being selected for audit,” Hunter says. “However, there is a new return subject to scrutiny.”

Although it is best to get your return right the first time, Hunter says taxpayers should not be shy about correcting their taxes.

“If you deserve an additional refund, you should claim it,” Hunter says.

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]

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